Non-residents who hold shares in Spanish companies or in foreign companies with real estate in Spain are obliged to pay wealth tax. We explain some interesting facts that you should be aware of if you are affected:
Wealth and non-residents
The cases in which non-residents have to file a tax return are the same as for residents:
– If, after calculating the tax liability, there is an amount payable.
– When the value of their assets and rights in Spain (including tax-exempt assets) exceeds two million euros, even without a tax liability.
The assets to be declared also include shares held by non-residents in Spanish companies or in foreign companies with assets located in Spain.
However, if the company is a family business, non-residents may benefit from the tax exemption for shares in “family businesses” under the same conditions as residents and provided that several conditions are met at the same time. Among others:
– They must individually hold a share of at least 5% of the capital of the business or 20% together with their spouse, relatives in the ascending or descending line or relatives in the direct line up to the second degree.
– The enterprise carries on an economic activity other than the mere ownership of land or shares.
– The person who owns the shares or a family member exercises a managerial function and their annual remuneration accounts for more than 50% of their total income from work and economic activities.
With regard to the last condition, it should be noted that if the person entitled to the tax benefit (this can be the owner of the shares, the spouse or one of their relatives in the ascending or descending line, or a second-degree relative in a straight line) is not resident in Spain, both the income earned by this person in Spain and abroad must be taken into account.
With real estate in Spain. New from January 2023 and for the purposes of Wealth Tax 2022, shares in non-listed companies at least 50% of whose assets consist directly or indirectly of real estate in Spanish territory must now also be declared. How is this percentage calculated?
– Assets must generally be valued at their market value as of 31 December.
– Real estate should be valued at the amount at which it must be declared for wealth tax purposes.
From the literal wording of the new rule, it seems that these participations should be declared at their full value and not at the proportional value of the real estate located in Spain (so it is possible that there will be litigation on this issue in the future). In any case, if the company carries out an economic activity and meets the other requirements for family businesses, the non-resident can declare his shares as tax-exempt and will not be taxed.
If you are affected by this tax and would like to know how to reduce or even avoid it, do not hesitate to contact us.